Retailers target penalty pay rates

Shop workers' penalty rates should be cut so the retailers can compete in an increasingly tough market, the industry says.

Australian Retailers Association executive director Russell Zimmerman says paying employees time-and-a-half on Saturdays and double-time on Sundays is not sustainable.

"It is vital that retailers remain competitive," he told reporters after giving evidence to a Productivity Commission inquiry into the sector. "We don't want to return to Work Choices.

"We believe that employees do need some compensation (for working weekends) but it is a seven-day-a-week business and you just cannot compete with the wages they're paying at the moment."

ACTU secretary Jeff Lawrence said retail workers' wages would drop and their rights relating to unfair dismissal and minimum shift lengths would be rolled back if the commission's draft recommendations were implemented.

"It would amount effectively to a return to Work Choices," he told reporters in Melbourne on Monday.

Mr Lawrence said the commission should scrap the section dealing with industrial relations in its final report because it was not interested in listening the workers or unions.

"We think the commission really should butt out of the whole area of industrial relations," he said.